ON Semiconductor Stock To $41?
ON Semiconductor (ON) stock has fallen 5.5% during the past day, and is currently trading at $58.75. Our multi-factor assessment suggests that it may be time to sell ON stock. We have, overall, a pessimistic view of the stock, and a price of $41 may not be out of reach. We believe there are several things to fear in ON stock given its overall Weak operating performance and financial condition. In addition, keeping in mind its High valuation, we think that the stock is Unattractive.
Below is our assessment:
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | High |
| What you get: | |
| Growth | Very Weak |
| Profitability | Moderate |
| Financial Stability | Very Strong |
| Downturn Resilience | Very Weak |
| Operating Performance | Weak |
| Stock Opinion | Unattractive |
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Let’s get into details of each of the assessed factors but before that, for quick background: With $24 Bil in market cap, ON Semiconductor provides intelligent sensing and power solutions enabling automotive electrification, fast-charging systems, and sustainable energy for solar, industrial power, and storage applications worldwide.
[1] Valuation Looks High
| ON | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 3.9 | 3.3 |
| Price-to-Earnings Ratio | 74.8 | 24.2 |
| Price-to-Free Cash Flow Ratio | 17.6 | 21.4 |
This table highlights how ON is valued vs broader market. For more details see: ON Valuation Ratios
[2] Growth Is Very Weak
- ON Semiconductor has seen its top line shrink at an average rate of -8.1% over the last 3 years
- Its revenues have fallen -16% from $7.4 Bil to $6.2 Bil in the last 12 months
- Also, its quarterly revenues declined -12.0% to $1.6 Bil in the most recent quarter from $1.8 Bil a year ago.
| ON | S&P 500 | |
|---|---|---|
| 3-Year Average | -8.1% | 5.6% |
| Latest Twelve Months* | -16.1% | 6.4% |
| Most Recent Quarter (YoY)* | -12.0% | 7.3% |
This table highlights how ON is growing vs broader market. For more details see: ON Revenue Comparison
[3] Profitability Appears Moderate
- ON last 12 month operating income was $932 Mil representing operating margin of 15.1%
- With cash flow margin of 28.8%, it generated nearly $1.8 Bil in operating cash flow over this period
- For the same period, ON generated nearly $319 Mil in net income, suggesting net margin of about 5.2%
| ON | S&P 500 | |
|---|---|---|
| Current Operating Margin | 15.1% | 18.8% |
| Current OCF Margin | 28.8% | 20.5% |
| Current Net Income Margin | 5.2% | 13.1% |
This table highlights how ON profitability vs broader market. For more details see: ON Operating Income Comparison
[4] Financial Stability Looks Very Strong
- ON Debt was $3.4 Bil at the end of the most recent quarter, while its current Market Cap is $24 Bil. This implies Debt-to-Equity Ratio of 14.2%
- ON Cash (including cash equivalents) makes up $2.9 Bil of $13 Bil in total Assets. This yields a Cash-to-Assets Ratio of 22.1%
| ON | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 14.2% | 20.0% |
| Current Cash-to-Assets Ratio | 22.1% | 7.2% |
[5] Downturn Resilience Is Very Weak
ON has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
2022 Inflation Shock
- ON stock fell 42.0% from a high of $108.09 on 1 August 2023 to $62.64 on 31 October 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $86.21 on 14 December 2023 , and currently trades at $58.75
| ON | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -42.0% | -25.4% |
| Time to Full Recovery | Not Fully Recovered | 464 days |
2020 Covid Pandemic
- ON stock fell 67.0% from a high of $25.62 on 14 January 2020 to $8.45 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 8 October 2020
| ON | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -67.0% | -33.9% |
| Time to Full Recovery | 204 days | 148 days |
2008 Global Financial Crisis
- ON stock fell 80.0% from a high of $12.99 on 23 October 2007 to $2.60 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 2 March 2015
| ON | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -80.0% | -56.8% |
| Time to Full Recovery | 2,293 days | 1,480 days |
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read ON Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
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